United Kingdom Employment Appeal Tribunal

APPEARANCES

 

For the Appellants	MR P NICHOLLS (of Counsel) Messrs Eversheds Solicitors Fitzalan House Fitzalan Road Cardiff CF2 1XZ
For the Respondents	MR D READE (of Counsel) The Robert Davies Partnership Solicitors Ysguborwen Usk Monmouthshire NP5 1LU


 


JUDGE PUGSLEY: This is an appeal against the decision of the Cardiff Industrial Tribunal dismissing claims of unfair dismissal and failure to consult on the transfer of an undertaking to the respondents, Darlows Limited. The tribunal held that the two employees concerned, the applicants in the tribunal below and the appellants in this appeal, were not assigned to that part of the undertaking transferred to the respondents, Darlows Limited, by their employers, the transferor, Cornerstone Limited.

The appellants have not argued before us, for obvious reasons, the issue set out in grounds 8 and 9, namely whether the dismissals for an economic reason because those matters clearly stand or fall on the other issues which form the forefront of the appeal.

The factual background to this case is set out in paragraphs 2 to 12 of the decision and the most convenient way is to quote from those paragraphs:

"2. From February 1988 Mr Kingston was employed by Cornerstone Estate Agency in a managerial capacity. From 3 January 1984 Ms Jones was employed by Cornerstone in an administrative and secretarial capacity.

3. Initially Mr Kingston's area of responsibility was South East Wales. Subsequently Worcester and Gloucester were added and in July 1994 he became responsible also for Devon, South Avon and Somerset.

4. In April 1995 as a result of a reorganisation within Cornerstone the Regional Officer for Wales and the West of England was relocated to Cardiff. Mr Kingston was appointed Regional Operations Director with responsibility for 20 Welsh branches and 11 Devon branches. Ms Jones was appointed his personal assistant/secretary.

5. In 1995 Cornerstone suffered severe financial difficulties. In early October Mrs Freeman, one of Cornerstone's remaining two directors informed the applicants that it faced possible receivership. Mr Kingston and Mrs Freeman formulated a buy-out business plan with which Ms Jones assisted. The plan was presented to Cornerstone on 10 October 1995.

6. On Saturday 14 October Cornerstone's other remaining director, Mr Snarey, signed an agreement for the transfer of its Welsh branches to Darlow's Estate Agency, of which Mr Alan Darlow is the controlling force. The typed agreement specifically excluded Mr Kingston and Ms Jones from the transfer.

7. On Sunday 15 October Mrs Freeman, who was unaware of the exclusion informed Mr Kingston by phone that the Welsh part of the business had been transferred to Darlows and that he and Ms Jones had been transferred with it. They continued to attend work at the Cardiff premises, which had been transferred with the Welsh part of the business to Darlows, but from Monday 16 October they found that their work had disappeared other than for finalisation of expenses claims for the Wales and West region as a whole for the previous month.

8. On Tuesday 17 October Mr Kingston was informed by Mr Darlow that he and Ms Jones had not been transferred but had been retained by Cornerstone to manager the Devon offices. He telephoned Mr Snarey who confirmed that this was so. At that stage Mr Snarey saw receivership of the Devon offices as a "strong possibility" but nevertheless hoped it might be avoided by re-financing.

9. No fresh finance was forthcoming and on 19 October Mr Snarey called in receivers. His evidence was that he did not realise at the time that Cornerstone still had £½ million in the bank. Had he done so, he said, it could have kept going for a least another month. Mr Kingston was not told officially that receivers had come in but learnt of it by phone from a manager on 19 October. He contacted the receivers and was told he and Ms Jones were to be made redundant from Cornerstone with immediate effect. On Friday 20 October they received redundancy notices from the receivers to take effect from 19 October.

10. On 20 October Ms Jones wrote to Mr Darlow and to the Receivers to ask why she was not included in the transfer of the Welsh Offices. Mr Kingston wrote similar letters on 21 October.

11. Mr Darlow replied to both applicants saying he had been told at the time of acquiring Cornerstone South Wales that they would be "dealing with the offices in the remaining areas". The receivers said they were unable to advise why they were not included in the sale.

12. On 30 October Mr Kingston wrote to Mr Snarey to ask why he was not transferred with the Welsh offices. Mr Snarey replied on 1 November that they were not included because "firstly Alan Darlow did not wish to take you and secondly, you had other duties for Cornerstone with your remaining offices".

The tribunal had to resolve the dispute between Mr Snarey, the director of the transferor company, Cornerstones Limited, and Mr Darlow, the transferee. They came to the view that they preferred the evidence of Mr Darlow. They found the evidence of Mr Snarey confused, vague and contradictory. They accepted Mr Darlow's evidence, and their conclusion of fact was that the exclusion of the two applicants was agreed orally between Mr Snarey and Mr Darlow prior to the transfer meeting, and prior to the production of the written agreement at that meeting, and they found that the exclusion was not at Mr Darlow's request but at Mr Snarey's request so that the applicants could be retained to deal with the remainder of the region.

The tribunal had considerable sympathy for both the applicants. In their view they had been treated unreasonably by Cornerstone, they were not correctly informed to their position upon the transfer, they were permitted and, indeed required, to attend for work at premises to which unbeknown to them they were no longer attached. During that period they were subject to differing views as to their status. Such information as they received was a result of unofficial information or on their own enquiry until they received their redundancy letters and subsequent enquiry elicited conflicting reasons for their dismissal.

The tribunal concluded:

"(i) that the transfer of the Wales part of the Cornerstone's Wales and the West business to Darlow's constituted a transfer of part of an undertaking to which the 1981 Regulations applied."

However, they considered:

"(ii)the applicants were not transferred with the Welsh Offices in that they were not "assigned" to that part of the business but were responsible for the region as a whole and were retained by Cornerstone's to deal with the remainder of the region which was still in existence at the time of transfer."

They therefore decided:

"(iii)that dismissal was not by Darlow's and was not for a reason connected with the transfer but was by the receivers and was for an economic reason, namely receivership resulting from financial difficulties."

They held that:

"The contract of employment were not contracts "which would otherwise have been terminated by transfer" within the meaning of regulation 5(1) of the 1981 Regulations. Accordingly the employment obligations under those contracts were not transferred to Darlow's under regulation 5(2)(a). The dismissal were not by reason of the transfer and were therefore not unfair within the meaning of regulation 8."

Their application therefore, it was held, failed.

Before us, Mr Nicholls on behalf of the applicants has sought to assail the decision of the Industrial Tribunal. The principal ground of appeal is that the tribunal erred in law in holding the employees were not employed in the part of the undertaking transferred to the respondents. He has submitted to us that the tribunal must determine which employees were 'assigned' to that part of the undertaking which was transferred. He cites case of Botzen v Rotterdamsche Droogdok [1986] 2 CMLR 50 at page 57 and especially at paragraph 13-15. He submits that that question is answered by considering all the relevant circumstances and cites Buchanan-Smith v Schleicher [1996] ICR 613 at 624, a decision of the Employment Appeal Tribunal presided over by its then President, Mummery J.

Mr Nicholls concedes that it is not possible to identify all the factual matters which may be relevant, because they will obviously vary from case to case. However, he submits, they will include such matters as the amount of time spent in the differing parts of the business, the amount of value given to each part, the terms of the contract, and how the cost of the employee's services are apportioned. He cites for that contention the case of Duncan Web Offset v Cooper [1995] IRLR 633, a decision of Morison J, in which those matters were indicated as being likely to being relevant to the issue. The material of the decision of the tribunal as to these issues is set out in paragraphs 20 and 21 which read as follows:

"20. For the applicants it is submitted that the larger percentage of their time in the Regional Office was taken up with Wales where they had more offices and with which they had many more problems due to managerial inefficiencies and lack of full-time staff, and that they were therefore assigned to the Welsh part of the business and, by virtue of the Regulations, were assigned with it to Darlows.

21. The submission is rejected. It was clear on the evidence that the applicants' managerial and administrative responsibilities covered the Wales and West region as a whole without assignment to any particular part. Had the West rather than Wales for some reason given rise to more problems that Wales, no doubt a larger proportion of their attention would have been directed to Devon irrespective of the number of offices. The fact was that they were responsible for the entire region and had to be prepared to tackle problems, inefficiencies and staff difficulties wherever they arose. We find that they were assigned to the region as a whole and not to one part of it."

Mr Nicholl's submission is that the analysis contained in the these paragraphs is insufficient and that the tribunal failed to consider all the relevant circumstances and failed to make findings of fact. He points out that the tribunal did not, for example, making findings of fact in respect of the matters specifically identified in Duncan Web, notwithstanding that that case was drawn to the tribunal's attention. The tribunal had found that Mr Kingston was responsible for 20 Welsh offices and 11 branches in Devon, and that Ms Jones was his personal assistant. It is pointed out that the tribunal in paragraph 21 are more concerned with the hypothetical problems that might have arisen and the responsibilities there might have been, rather than making findings of fact as to exactly what these two employees were engaged upon immediately prior to the transfer.

For the respondents, Mr Reade points out that the tribunal's attention was specifically drawn to the decision of Botzen and Duncan Web and that the tribunal clearly had in mind the legal test to be applied to determine this issue. He said that the tribunal made a clear finding of fact that the appellants were not transferred to that part. Mr Reade points out that the tribunal heard oral evidence, which included the evidence of six witnesses and took into consideration the documentary evidence which included parts of Mr Kingston's diary. He states that it is not necessary for the tribunal to produce a check list of findings when these were merely factors in a central question of fact which was the answer to the question posed in Duncan Web. Mr Reade's argument, which he puts with considerable skill and force, is that this is an attempt to dress up as an issue of law what pre-eminently a matter of fact, and it cannot be said that the decision the tribunal reached was plainly wrong; not a permissible object or in the words in the case of Ministry of Defence v Bristow [1996] ICR 544:

"makes absolutely no sense".

We accept that it is quite wrong to expect an Industrial Tribunal decision to set out at great length propositions of law and it is unnecessary for a tribunal to set each and every subsidiary finding of fact which leads them to a particular conclusion. Having said that, it is pertinent to note that if one reads this decision as a whole, then one is struck by the fact that other than the finding of fact of the matter which was not in issue, namely that Ms Jones was Mr Kingston's personal assistant/secretary, hardly any finding at all is made as to exactly what her functions were. It is common ground that both the employees worked from their office in Cardiff; and again it is common ground, that there was consideration before the tribunal as to extent to which Mr Kingston spent time away dealing with problems that took place in Devon, and there was consideration, for example, of the amount of time he spent away from home and had to put up in an hotel. In Buchanan-Smith at 622 Mummery J set out the tests as follows:

"... As illustrated by Duncan Web Offset (Maidstone) Ltd v. Cooper [1995] I.R.L.R. 633, an employee may in fact be regarded as assigned to an employer's business, even though that employee spends time looking after another business, even the business of someone other than the employer. In the case of one employer carrying on two undertakings, an employee may be assigned to one of the undertakings, even though engaged in the activities of the other undertaking. In our view, there is nothing in the earlier decisions of this appeal tribunal or in the European Court of Justice's decision in Botzen v. Rotterdamsche Droogdok Maatschappij B.V. (Case 186/83) [1985] E.C.R. 519, to the effect that a person can only be regarded as employed in an undertaking, or part of an undertaking, if he works exclusively in that undertaking or part. ... The test whether a person is employed by an undertaking or part is simply: was he assigned to that undertaking or part? That is a question of fact to be determined by considering all the relevant circumstances."

We consider that there is force Mr Nicholl's contention that this tribunal did not analyse those matters set out in the judgment of Morison J or such matters as arose on the facts of this case in relation to either of the employees, and carry out the balancing act necessary to ask themselves whether or not these two employees were assigned to that part of the undertaking which was transferred, namely that of Wales.

We are particularly concerned that Ms Jones' position is equated with that of Mr Kingston, since it may very well be on a true analysis of the position that they did have very different functions, and it is, we suspect the case, that Ms Jones' job was primarily, if not exclusively, located in Cardiff and rather different considerations would apply to her case than that of her manager, namely Mr Kingston.

We have come to the view that the tribunal did not make such findings of fact as were necessary to consider the question whether Mr Kingston and Ms Jones were assigned to that part of the undertaking which was transferred, namely the Welsh area. We consider that the tribunal were required to make findings of fact within the ambit of those matters set out in Duncan Web, and it was an error of law merely to rely on hypothetical contingencies that might occur, rather than considering what both employees were actually doing. Moreover, each of the applicants was entitled to have their position considered separately; and their job function was such that it may be that their prospective positions could not be equated. That is not a matter which it is possible to speculate about in view of the absence of findings of fact made by the tribunal.

Mr Reade has argued that irrespective of the inadequacy of the reasons given by the tribunal as to assignment, this case cannot succeed because of the finding of fact made by the tribunal that these employees were as a matter of deliberate intention retained by Cornerstone to deal with the problems in the remainder of the region. He points out that Regulation 5(1) has effect if the contract "would otherwise have been terminated by the transfer". If, he contends, the appellants' contract would not be terminated by the transfer, then Regulation 5(1) does not apply. He points out that in its express findings of fact in paragraphs 22 to 29 the tribunal decided that Cornerstones, in the form of Mr Snarey, made the deliberate decision on their finding of fact, to retain the two employees in order that they may deal with other parts of the area of their responsibility.

Mr Reade cites the passage at Volume 1, page F/46 of Harvey for support for that proposition. The learned authors of Harvey say of the words: "which would otherwise have been terminated by the transfer" at paragraph 140:

"Clearly, however, these words will, in appropriate cases, remove employees who are retained either temporarily or permanently by the transferor from the scheme of the Regulations. There would seem to be nothing in principle against the employer making it clear in advance of the transfer of a relevant undertaking to an employee that his or her employment will remain with the transferor (for example because the terms of the contract contain provisions which are sufficiently wide to entitle the transferor to require the employee to work in another part of the business which is not being transferred and the transferor so directs the employee prior to the transfer of the undertaking which is being disposed of). This is sometimes facilitated by the not uncommon practice, in a group of companies, of employing staff in a parent or service company with the consequence that the staff working in the undertaking are not employed by the subsidiary company which is the transferor."

This is an interesting argument and of course the views of the editors of Harvey carry considerable weight, but in our view, this argument is misconceived.

Mr Nicholls invites us to say that the words in the Regulation which do not appear in Article 3 of the Directive is not more than the recital of the abrogation of the fundamental principle of English law that an employee could not transferred from one employer to another without his consent.

Further, Mr Nicholls contends, that to enable an employer to, if they wish, deploy the employees in the other part of the business, is, in fact, to contract out of the TUPE Regulations and he cites the case of Rotsart de Hertaing v Renoidt and IGC Housing Service [1997] IRLR 127 ECJ. Mr Nicholls argues we should interpret the Regulations purposefully in the light of the case of Litster v Forth Dry Dock & Engineering Co Ltd [1989] ICR 341 in such a way as would enable an employer to defeat the protection conferred by such Regulations.

We consider that both these objections to the arguments of Mr Reade are well-founded, but in our view, there is a third objection and it is this. If X and Y are assigned to a part of an undertaking which is then transferred, if an employer decides that he wishes to retain their services temporarily or permanently to deal with a subsidiary part of another area of work, then in many circumstances that decision will amount to a dismissal. If an employer sells off the principal area of the employee's work, then it may be somewhat academic as to whether that amounts to a constructive or an express dismissal. But in either event, that state of affairs would have have come about by the decision to transfer the undertaking.

In these circumstances, in our view, there are fundamental reasons whereby this decision, although it carefully sets out the facts, is flawed. The matter should be remitted to a differently constituted tribunal.